This week marks five years since one of the world’s worst disasters linked to labour exploitation in supply chains.
The Rana Plaza factory collapse in Bangladesh, which killed 1,134 people, put the reality of supply chain risks firmly in the public domain.
Since the 2013 disaster, the Modern Slavery Act has been introduced in the UK, requiring large organisations to report annually on the steps that they have taken to address slavery and human trafficking risks in their own business or in their supply chains.
According to UK’s Transparency in the Supply Chain reporting tool, 9,450 UK companies required to adhere to the act are yet to report, partially, I suspect, because it costs money, and partly because there is no effective mechanism to police compliance.
For those who have reported, the most commonly favoured approach is one of zero-tolerance. This is a laudable position, but what does it mean in practice?
Fantastic work has been done to improve supply chain transparency through audits and compliance, but we see unwanted side effects to the mantra that suppliers must “comply or die”.
The stance shifts the responsibility squarely on to suppliers. In our experience, “zero tolerance” can devalue the audit process because it can foster suspicion and fear among suppliers, instead of transparency. It may encourage suppliers to cover up issues – driving them towards criminality and fraud.
A “zero-tolerance” approach also gives consumers and stakeholders the appearance that all is well. Even the most advanced retailers only have visibility over the first one or two tiers of their supply chains. In the complex world of subcontracting, companies may have eight or more levels of suppliers involved in creating a single product.
Such an approach drastically limits the options a retailer has if an issue is discovered or publicised. Cutting the offending supplier impacts both business continuity and the livelihoods of those most at risk.
Engaging with suppliers
Some retailers are instead promoting a philosophy based on capacity building, engagement and transparency, rather than a “tick-box” exercise.
These retailers accept that they will encounter labour issues. But when issues are uncovered and investigated, they increase their engagement, rather than cut the supplier loose. By encouraging transparency from the supplier and engaging in fixing their issues, they secure a trust-based relationship.
A leading retailer’s recent sustainability and modern slavery reports contain no mention of “zero tolerance”, but instead promote supplier capacity building.
The retailer highlights one example, when their work with a supplier resulted in two victims being rescued and a successful conviction of a landlord for trafficking and slavery offences. The supplier was praised for its transparency, not sanctioned.
Such companies identify issues that suppliers were previously too afraid to report and are much better placed to assist those at most risk.
So, what more can be done? There is no easy solution. Clearly retailers must play a role, but perhaps not that of “police officer”. Enforcement will never succeed on its own.
The act has resulted in greater corporate attention to this issue than ever before, but public engagement remains depressingly low.
Education can deliver real change, and retailers that can communicate transparently about their progress and the challenges they face are more likely to attract and keep increasingly socially conscious consumers.
They should be better treated when a crisis erupts than those who refuse to engage. But ultimately consumers decide.
Let’s hope that it doesn’t take another disaster to make the difference.
William Scott-Gall is associate managing director of Kroll’s investigations and disputes practice